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Peso may strengthen on progress of stimulus bills

peso may strengthen on progress of stimulus bills - Peso may strengthen on progress of stimulus bills

THE PESO is expected to appreciate further against the US dollar this week in anticipation of developments on vaccines against coronavirus disease 2019 (COVID-19) and on pending stimulus bills.

The local unit inched up to P48.04 against the greenback on Friday from its P48.045 finish the day before, data from the Bankers Association of the Philippines showed.

Week on week, the peso strengthened by two centavos from its P48.06 finish on Nov. 27.

The peso’s sustained appreciation was supported by rising optimism over COVID-19 vaccine developments.

The local unit may strengthen further against the greenback can be seen this week on expectations that pending stimulus bills and with the P4.5-trillion budget for next year will gain final approval soon, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a mobile phone message.

Among these stimulus measures are the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE bill that seeks to cut corporate income tax and streamline tax perks and the Financial Institutions Strategic Transfer or FIST Act, which aims to create institutions where banks can offload their bad loans.

The two measures form part of the country’s recovery program as they give relief to the private sector hit hard by the pandemic.

Both bills have been passed by the Senate and the House of Representatives and are now awaiting for the approval of a Bicameral Conference Committee before they can be enacted by President Rodrigo R. Duterte.

Meanwhile, both chambers assured last week that the ratification of the 2021 P4.5-trillion budget can happen this week to prevent the government from operating on a reenacted spending plan while the economy recovers from the impact of the coronavirus pandemic.

Other possible catalysts include the expected increase in remittances sent by overseas Filipino workers ahead of the Christmas season and more positive news about the development of COVID-19 vaccines, Mr. Ricafort added.

Britain last week approved the COVID-19 vaccine developed by Pfizer, Inc. and its partner BioNTech which was seen 95% effective in preventing the illness, Reuters reported.

Meanwhile, the release of latest data on international trade should also provide some lift to the peso this week, said Ruben Carlo O. Asuncion, chief economist at the UnionBank of the Philippines, Inc.

The Philippine Statistics Authority (PSA) is set to release October international trade data on Thursday, Dec. 10.

Latest PSA data showed goods exports ended a six-month losing streak in September after growing by 2.2% to $6.22 billion. Meanwhile, goods imports remained in the red that month, falling by 16.5% to $7.92 billion. This brought the trade deficit to $1.71 billion.

In the 10 months to October, exports were down 14% to $45.87 billion and imports fell 26% to $61.95 billion, taking the year-to-date trade balance to a narrower $16.07-billion deficit.

For this week, Mr. Ricafort sees the peso moving between P47.90 and P48.15 against the greenback, while Mr. Asuncion expects it ranging from P47.85 to P48.15 per dollar. — B.M. Laforga

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